Investor… Trader… Speculator….  we hear the terms all the time.   We often use them interchangeably but in truth, these are players in three very different investment games.

Gold Investors

The gold Investor has four major characteristics…

·         Long Term Orientation - The gold Investor will buy gold bullion on a regular baisis whatever the spot price. He is motivated by a belief that, over time, ownership of gold will be financially beneficial.  The Investor is usually committed to the investment for the long–term.   

·         Ownership – The gold Investor is usually personally committed to the investment and will, if possible, be active in supporting it.  The gold Investor will consider not just the asset trading value but also the potential returns from dividends and other long-term benefits of ownership.

·         Knowledge – The gold Investor will often study and research both the industry and the specific investment in depth before implementing an investment decision.

·         Persistence – The gold Investor will usually not make buy or sell decisions based on short-term market fluctuations.  The true investor will Buy gold bullion based on long-term promise and will seldom Sell because of short-term declines.

 In summary, the gold Investor is looking for long-term benefits of ownership.

 Gold Trader

 The gold Trader also has four major characteristics… 

• Short Term Orientation – the gold Trader is primarily interested short-term gain.  As a result, a Trader may Sell an investment literally minutes after Buying it, if it is profitable to do so.
• Ownership Indifference – the gold Trader has little interest in gold bullion ownership.  The Trader is interested primarily in the Trade.  If it is profitable to Sell, the Trader will sell… if it is not profitable to Sell, the Trader will hold, unless selling at a loss will free up funds for a more profitable trade.
• Knowledge – the successful gold Trader must be well informed about the factors and relationships that impact the value of existing and potential investments. While the Trader may know little about the details of a gold mining stock, the Trader will understand that a bloody revolution in the Middle East will probably drive up gold prices, and that will, in turn, drive up the price of the mining company stock.
• Sensitivity – the gold Trader lives in a world where minutes… even seconds… can make all the difference.  The Trader must be well informed with timely information and must be prepared to make major decisions, almost instantly.

 In summary, the gold Trader is looking for very short-term profit opportunities. 

Gold Speculator

 The gold Speculator also has four primary characteristics: 

• “Big Hit” Orientation – the primary motivation of the gold Speculator is the “Big Hit’… that is, a large, one-time profit.  Speculators are seldom attracted to modest, low-risk investments. 
• Willingness to Loose – the gold Speculator recognizes that large profits usually entail large risks.  As a result, most Speculators recognize that many of their ventures will fail.  However, the potential return on the occasional success justifies the losses… these losses are simply considered to be a “cost of doing business”.

• Short Term Orientation – the gold Speculator is primarily interested in large, short-term gain. 

• Knowledge – the gold Speculator makes “deals” based on a body of knowledge that convinces the Speculator that the deal will be extremely profitable… usually in the short-term.  This knowledge may be based on information that is not generally available or it may be based on an unconventional interpretation of available information.

In summary, the gold Speculator is looking for the occasional, “big hit” deal.

Of course, nothing about gold investing is simple and the label that applies to any player… investor, trader, speculator… can change with a single transaction.

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